From January to August of 2012, there were 1,636 shipbuilding
enterprises each with annual sales of over RMB20 million in China, all
of which accompished gross industrial output value of RMB519.4 billion
with a year-on-year growth rate of 2.7%; wherein, shipbuilding industry
achieved RMB391.8 billion, down 1.6% year on year; the shipbuilding
support industry generated RMB75.4 billion, up 24.2% year on year; the
ship repair industry gained RMB11.6 billion, with a year-on-year
increase of 9.1%; the ship refitting industry obtained RMB19.7 billion,
showing a year-on-year growth rate of 17.4%; and the marine engineering
equipment manufacturing harvested RMB18.1 billion with a year-on-year
growth rate of 15.7%.

Civil steel ships prevail in China. In 2009 and 2010, civil steel ships
maintained a quite high growth rate; but the growth rate slipped to
25.37% and the output totaled 92.15 million DWT in 2011. In the first
nine months of 2012, the cumulative output of domestic civil steel ships
amounted to 54.314 million DWT, down 12.80% year on year, a wider fall
of 5 percentage points than that in the previous 8 months.

In 2012, most of the ships that China should deliver are the low-cost
ships for which China signed contacts after the international financial
crisis. All economic indicators of the shipbuilding industry are
expected to see negative growth. We believe that 2012 is likely to be
the most difficult year for shipbuilding enterprises, and the industry
will touch the bottom. In 2013, the situation will turn better, but it
will still be far from the pre-crisis level.